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California Court of Appeal Holds Attorney Is Not Bound By Settlement Agreement’s Confidentiality Provision Based on Boilerplate Language in the Signature Block

Aug 31, 2018 | Topics: Product Liability, Business Litigation, Warranty

Virtually all settlements include some type of confidentiality provision.  Some confidentiality provisions may only require the parties to keep the terms and conditions of the settlement confidential; while others are more expansive, and require the parties as well as their attorneys to keep the settlement confidential.  In settlement agreements with these more expansive confidentiality provisions, the parties’ attorneys typically sign the agreement.  However, if the signature block for the attorneys includes the phrase “approved as to form and content,” the attorneys are not bound by the agreement’s confidentiality provision, according to a recent California Court of Appeal decision—Monster Energy Company v. Schechter, ---Cal. App. 5th ---, 2018 WL 3829255, No. E066267 (Aug. 13, 2018)

The settlement agreement at issue in Schecter stems from a product liability action (the “Fournier Lawsuit”).  This settlement agreement—like most product liability settlements—included a confidential provision that required the plaintiffs and their attorneys to keep the terms and conditions of the settlement confidential.  Indeed, plaintiffs and their attorneys agreed not to publicly disclose the terms of the settlement to any person or entity, including any media outlets and websites.  The parties and their attorneys signed the agreement.  However, above the attorneys’ signature block was the phrase “approved as to form and content.”

Subsequently, plaintiffs’ counsel (Bruce Schecter) provided comments about the Fournier Lawsuit to a reporter from Lawyersandsettlements.com, which were later published in an article on Lawyersandsettlements.com.  In response, Monster sued Schecter on the basis of (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) unjust enrichment, and (4) promissory estoppel.  Schecter countered with a SLAPP motion asserting, among other things, that Monster could not show a probability of prevailing on its breach of contract claim because Schecter was not a party to the settlement agreement.  The trial court ultimately denied the SLAPP motion on the basis that Schecter was bound by the settlement agreement. 

On appeal, however, the court of appeal found, in part, that (1) the parties to the settlement agreement were only the Fourniers and Monster, and (2) since Schecter signed the agreement under the phrase “approved as to form and content,” he signed it solely in his capacity as an attorney who has reviewed the agreement and had has given his clients his professional approval to sign it.  Thus, Schecter was not a party to the settlement agreement, including its confidentiality provisions, and Monster could not show that it had a probability of prevailing against Schecter on its cause of action for breach of contract.

The key take away here is settling defendants should avoid using “approved as to form and content” and similar language in their settlement agreements.  And specifically draft the confidentiality provision to ensure that plaintiff’s counsel is expressly bound by the settlement agreement’s confidentiality provision.